Treasurer Joe Hockey will side with the United States over the most hotly contested issue before the Group of 20 ministers, saying Australia would benefit from a lower dollar if the US Federal Reserve trims its economic stimulus.

As the Treasurer prepares to host the ministers in Sydney this weekend, he predicted the Fed policy would weaken Australia's rampant dollar, offering welcome relief to the economy.

"I think it's helpful to us, from my perspective, because it will strengthen the US dollar [against the Australian dollar and other currencies],'' Mr Hockey said in an interview with Fairfax Media.

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"It gives us a little bit of respite."

The local dollar is trading about US90¢. This is about 15 per cent cheaper than its peak at the height of the mining boom but still 20 per cent higher than its average since it was allowed to trade freely in 1983.

The strong dollar has made Australian products more expensive. Manufacturing, tourism, higher education and other export industries have been hit hard.

But Mr Hockey acknowledged that the Fed policy - so-called "tapering" - was unpopular with the governments of developing countries, which make up almost half the G20. "The US Fed has to do what's in the best interest of the US, and if the US does well it's good for the whole world and particularly good for Australia,'' he said.

"We're very mindful of what's happening in the rest of the world. I don't see any systemic problems in developing nations - each nation has its own issues, idiosyncratic issues - but I don't see any systemic issue that causes us to be concerned about tapering. It adds pressure to some economies."

The Fed has force-fed about $US3 trillion into the financial system over the past five years to raise American growth, and this has boosted global markets, and cheapened their currencies.

But now that the flow is going into reverse, many developing countries fear the outrush of capital will crash their markets and roil their economies. They want the US to consider their fates.

India's central bank governor Raghuram Rajan complained last month that "international monetary co-operation has broken down" and said the rich countries "can't at this point wash their hands off and say we'll do what we need to''.

The new chair of the US Fed, Janet Yellen, and Mr Rajan will be among the finance ministers and central bank governors meeting in Sydney at the weekend.

Seeking to balance his pro-US policy with one favoured by the developing countries, Mr Hockey is lobbying against the US Congress position on reform of the International Monetary Fund. "The US has an obligation to help with the reform of the IMF which allows developing countries to have a greater say at the table. And we're going to prosecute that,'' he said.

Mr Hockey said Australia's focus would be on the need for governments to foster global growth and investment, particularly in the private sector.

15 comments

Hockey's position on the US continuing to taper its QE is at odds with Prime Minister Abbott's. Abbott used his speech at the meeting in Davos to caution the US on QE tapering.

It is becoming obvious that Hockey is the strongest link in this conservative government. Abbott's talents are restricted to opposition tactics and he is floundering to find his abilities as a positive Prime Minister.

Commenter

Glynn

Location

Ferny Grove

Date and time

February 17, 2014, 9:43AM

hockey is the strongest link? generally I think thats drawing a long bow however considering you used abbott as the baseline to compare against I think you are spot on. This doesnt make his unhealthy obsession with making a sustainable debt an unsustainable budget emergency any more tolerable though.

Commenter

harry

Location

melbourne

Date and time

February 17, 2014, 11:02AM

The biggest exporters of high tech, high value products have been chased out of Australia by Hockey and Abbott just as the dollar is turning. Forward thinking by our Liberal/National Government..............NOT!

Commenter

Liberal/National Middle Class Welfare Party

Location

Melbourne

Date and time

February 17, 2014, 11:10AM

The fact that Joe is sprouting out to all and sundry that he is in the middle of reading Maggie Thatchers book should tell us allll something??

And..abbottt has set up a never-ending chain- line of organisations that are on the march overseas by making it clear that he will not be giving any gov support to any org that he feels should be looking after itself,(even though we are only a few years behind the GFC).....he his sprouting this everywhere and with Joe goading holden, and then abbottt telling toyota workers it was their own fault(nice), even though toyota made it clear that it was NOT the workers fault, but was to do with the fact the gov will NOT subsidise them, and that the gov had SIGNED 'free' trade deals that have disadvantaged the car industry in auss., allowing other countries to stick up tarriffs and subsidise their industries against us, preventing us selling from cars and other things in their countries...

And now Joe side with the US over the tapering saying it will give us a lower dollar.Yep....maybe this is true ....but what about the inflation on imported goods thats going to happen as a result of this??

This means that new cars that Robb is bleating on about being cheaper because of the secretive TPP free trade deal he has signed........will actually end up dearer, as our foreign exchange dollar rate drops????

So the benefit that some orgs getfrom more exports, will be off-set by the more expensive imports on equipment etc., because of the lower dollar.

And because auss is losing it's manufacturing to overseas faster than we can say "rippoff"..most things we buy now come from overseas....Mangled mess I think....

Commenter

Yosmite

Date and time

February 17, 2014, 11:25AM

Hockey is going to have to find $880 million in the budget that just went to Murdoch who pulled a swift one on the tax office for a deal were no money changed hands but tax claims were made.

Commenter

Bazza

Date and time

February 17, 2014, 12:22PM

If Hockey is the strongest link, we're in big trouble!

Commenter

Casa

Location

Sydney

Date and time

February 17, 2014, 1:27PM

So Hockey now acknowledges that the $A is high and this hits manufacturing, tourism, higher education and other export industries, hard??

He certainly wasn't owning up to that fact when he was putting the Australian car industry out of business!! That was, according to him and his boss, all the fault of the unions.Never mind that the unions, working in conjunction with employers and the government, had seen Australian tariffs drop from 60% in the 1980's to 5% today. Massive improvements were made to competitiveness during that time and export markets were opened up overseas.Now that money and effort is all gone, along with hundreds of thousands of Australian jobs. Wasted!!

But the high $A of the last six years, since the GFC, was reeking major damage on Australia's car industry. The government of the USA was prepared to manipulate its' currency lower to protect the competitiveness of its' manufacturing sector. The Chinese have an 80% tariff on car imports, protecting their emerging car industry.

But not according to our government!! The problem with Australia's car industry was the unions, despite the comments to the contrary by the manufacturers themselves. We can trash hundreds of thousands of Australian jobs and a place among leading manufacturing nations because the Coal-ition says the private sector will fix it all up in the end and they can all get work digging up brown coal. Which we will be able to do for centuries because climate change is all hogwash and other nations will be demanding our coal for years to come.Such vision!!

Commenter

Cee Bee

Date and time

February 17, 2014, 2:42PM

Did the 198th best treasurer in the world just say something?..Sloppy Joe stumbles again.

Commenter

Steeden

Location

Ballina

Date and time

February 17, 2014, 10:53AM

Question...What does China has to say about all this? Have we contacted Beijing first?